Apr 17, 2017

No Takebacks on Quitting, but Employee Has to Mean It

Avalon Ford Sales (1996) Limited v Evans, 2017 NLCA 9 (CanLII)

When an employee makes a dramatic exit from the job, employers will be well suited to consider whether the employee actually constituted resignation, or just did something that will make for an awkward meeting the next day.

Following a tense day at the car dealership where the Plaintiff employee worked, the employee handed in his keys and cellphone and informed his employer that he was “done.” Four days later, the employer met with the employer with a note from his physician supporting a request for stress leave. The employer harshly criticized the employee for deserting the dealership, tore up the note, and told the employee to leave the premises.

The issue before the Court was whether the Plaintiff had resigned, or if he had been wrongfully dismissed by his employer.

The Trial Judge determined that the employee’s resignation was not unequivocal, and therefore not effective. The Trial Judge further concluded that the duty of good faith and honest dealings, as recently articulated in Bhasin v. Hrynew, 2014 SCC 71 represented an alternative grounding for the conclusion that the employee had been wrongfully dismissed.

With an implied duty of good faith and fair dealings being an implied term of the employment contract, the Trial Judge determined that there was an obligation on the employer to give the employee “time to cool off and reconsider.” By breaching this fundamental term of the employment contract, the Trial Judge determined that the employer had committed a fundamental breach of the employment contract and constructively dismissed the employee.

The Court of Appeal took issue with the Trial Judge’s good faith analysis and determined that the duty of good faith was more appropriately considered with respect to whether resignation had been communicated by the employee, and accepted by the employer.

This avoids creating a separate and distinct obligation on the employer. Rather, it reinforces the employer’s obligation to effectively communicate acceptance of the resignation. This heightened obligation was noted as follows:

[26] Moreover, this is precisely the type of situation where the overarching duty of good faith takes effect and influences the interpretation of the established doctrines of “resignation” and “reasonableness”. Particularly where there has been a lengthy employment relationship and the employer is aware that the employee has a sensitive disposition and may be emotionally and financially vulnerable, the employer cannot, without clarification, reasonably conclude that the employee’s intention is to resign solely on the basis of the employee’s statement “I quit”.

The difference in the reasoning of the Trial Judge and the Court of Appeal demonstrates the remaining confusion on what it means for good faith to be an “organizing principle” of contract law. The Court of Appeal’s approach appears to be an attempt to impose limits on the Supreme Court of Canada’s decision by restricting it to interpreting existing doctrines.

However, the distinction was immaterial to the outcome. The Trial Judge’s decision that the resignation was not unequivocal, a conclusion strengthened by the duty of good faith, was determinative of the issue. The Court of Appeal accepted the Trial Judge’s finding that it was not reasonable for the employer to conclude the employee had resigned, in light of the length of their relationship, and the circumstances of his “resignation.”

By failing to inquire further on the matter and treating the employee as someone who had resigned, the employer had not breached a separate duty of good faith, but rather breached the conventional requirement that resignation must be communicated by the employee, and accepted by the employer.

A limited approach to good faith is consistent with concerns of commercial certainty, and this decision serves as a reminder to parties that the Court will be reluctant to impose rights and obligations beyond conventional contractual rights. However, where the contract includes an express or implied term to act reasonably, the duty of good faith may serve to heighten the obligation.